BofA returns to form with Merrill rehire trick

At least one legacy of the old Merrill Lynch is thriving at Bank of America: the kiss-off-and-embrace-back. The firm just rehired two former Merrill rainmakers who left in the dislocation following the broker’s sale to BofA during the financial panic of late 2008. While not an uncommon practice on Wall Street, no firm appears to have made so much a habit of welcoming back bankers as Merrill Lynch.

In the latest instance, it lured Sam Chapin and Todd Kaplan to return as executive vice chairmen of global banking, reporting to Tom Montag, who runs investment banking and trading. Chapin and Kaplan, who will focus on clients, have a combined 48 years of Merrill tenure.
With the integration of BofA and Merrill more settled, it’s a good sign the combined institution can win back grey-hairs who also know how to win business. Rivals have attempted similar back-to-the-future maneuvers. Lazard just welcomed back Felix Rohatyn, its octogenarian former senior partner and Wall Street elder statesman. Morgan Stanley begged John Mack to come back and run the firm in 2005, four years after he’d been ousted.
But Merrill is especially fond of its exiles. Former chief Stan O’Neal cut too deeply in the bond market rout of the early part of the century. To catch up quickly, Merrill rehired some traders — many of whom wound up taking big risks in subprime and structured finance. That infamously led to billions of losses and O’Neal’s ouster. To help clean up the mess, his successor John Thain rehired a former fixed-income executive, Jeff Kronthal, who had departed a year earlier because he thought Merrill was taking too many risks.
Flexibility in hiring the best people for the job isn’t necessarily a bad thing, if it shows pragmatism. On the other hand, Merrill’s repetitive practice of having to win back executives once kicked to the curb suggests a troubling volte-face management style. That could be expensive for shareholders, particularly if Merrill has to pay up to let people go — and then do the same to win them back.

The good ole’ boy network wins again and the rich get richer. Too bad wealth transfer runs amuck across the globe – Northern Europe to Southern Europe, Anywhere wealth hides in the US. I work for the website Storyburn, and I can see why folks are pulling their hair out over the temp job being the new full time job, China stealing our mojo, Wall Street bonuses at record highs, and people taking a 10% paycut and asked to work unpaid overtime. We have the most read home foreclosure story as well as several job hunting stories

Businesses have always been more organic than they teach in b-school. It’s all seat-of-the-pants, all the time and always has been. Outfits that develop their people do well, outfits that try to substitute process for good people fail. Old fact that seems to never quite get learned.

Antony Currie and Robert Cyran explain the financial logic behind the health insurer's deal for Catamaran and why it indicates pharmacy benefit manager M&A may be winding down.Video

ABOUT BREAKINGVIEWS

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. The company was founded in 1999 as Breakingviews.com and was acquired by Thomson Reuters in 2009, becoming Reuters’ brand for financial commentary. Every day, we comment on the big financial stories as they break. Our expert analysis is provided by a global team of correspondents based in New York, Washington, Chicago, London, Paris, Madrid, Hong Kong, Beijing and Singapore.

For the full commentary and analysis service from breakingviews.com, including regular emails containing the latest views, contact sales@breakingviews.com.